Wednesday, October 21, 2015

Governor Cuomo, Fitzpatrick, and Money

Early this fall, Entergy announced that both the Pilgrim plant and Fitzpatrick plant were losing money, and that Entergy would soon decide whether to continue operating those plants. Entergy said they would make the decision by the end of October.

The Pilgrim plant has been decided: Vice President Bill Mohl of Entergy announced that the Pilgrim plant in Massachusetts would close by 2019. At the same press conference, Mohl said that Entergy has not yet made a decision about whether it would to continue to operate the James A. Fitzpatrick plant in New York State. (You can read about the press conference here, and even see the video of the whole conference.)

Entergy has not made the decision about Fitzpatrick. However, on October 16, Entergy took a $965 million charge against earnings, writing down the value of the Fitzpatrick plant by that amount. (Yes, that's about a billion-dollar write-down.)

The people in the Fitzpatrick area do not want the plant to close. Hundreds of people in upstate New York rallied in favor the plant. You can see a short video of the rally here; the video includes interviews with local legislators who support the plant. The Syracuse.com article that describes the write-down also has more than thirty pictures of the rally.

Entergy is attempting to negotiate a deal with New York State that would keep Fitzpatrick open. As quoted in the Time-Warner article and video about the rally, State Sen. Patty Ritchie said: "I've been in a number of conversations with the governor's staff and also had an opportunity to talk to the governor, he's engaged in the issue."

However, Governor Cuomo's engagement is something that is rather hard to define. Despite the fact that Entergy closed Pilgrim and despite the fact that Entergy took almost a billion-dollar write-down on the Fitzpatrick plant, Cuomo is treating the situation as if it is all about….well, all about him.

Cuomo's view is that Entergy is threatening the state with "job losses" and Entergy won't get away with this. Yes, Cuomo himself plans to stand up to Entergy, despite their "threats." What a guy! (sarcasm alert)

I strongly caution Entergy not to use the threat of job losses as a means of prodding economic relief to help their bottom line. This tactic has been attempted by others i‎n the past and has been unsuccessful. In this state, an entity called the Public Service Commission has oversight over services deemed to be in the statewide public's best interests.Entergy should keep that in mind. Any decisions will be made on the merits

Entergy didn't write an answer to Cuomo directly. Instead, Vice President Bill Mohl wrote a note to the employees which indirectly referenced the Cuomo's accusations of "threatening job losses." Once again, Knauss has the story in Syracuse.com. Here's a quote from the Mohl letter to the employees:

While we have been unsuccessful to date, our discussions [with the state] are continuing as we approach a final decision. Quite frankly, our desire has been to engage in meaningful discussions regarding continued operations of Fitzpatrick without first having to provide formal notification of a Fitzpatrick shutdown decision to the State of New York, as some have indicated is necessary. Most recently, we have heard inaccurate claims that we are "holding employees hostage" or "only seeking to improve our bottom line." That is simply not the truth. We are facing substantial financial challenges at Fitzpatrick and have been negotiating in good faith with New York State over the last several months to obtain certainty for this facility.

I am Shocked, Shocked

Governor Cuomo acts as if New York State has never made any kind of concession to attract or keep a business. He is shocked that a business would ask for such a thing, in order to continue to employ people in New York. He is shocked, shocked!

Meanwhile, here in Vermont, we can only envy the deep pockets and major financial concessions that New York gives to businesses.

New York basically outbid Vermont to have a new wafer fabrication plant placed in their state. New York was able to offer $1.865 billion dollars in concessions to the plant owners, the emirate of Abu Dhabi. Poor little Vermont could offer---a $4.5 million dollar "Enterprise Incentive Fund." (An existing plant in Vermont will continue operating, however.) It's a long story, and well told in this VTDigger article Global Foundries to Keep IBM Plant in Essex Going. Some quotes:

GlobalFoundries’ footprint in New York vastly outstrips that of Vermont. The company…is wholly owned by the emirate of Abu Dhabi…..New York state has offered GlobalFoundries about $1.865 billion in financial incentives to establish itself in the state, according to a recent situational analysis of IBM’s plant in Essex Junction by the Greater Burlington Industrial Corp.In May, the Vermont Legislature budgeted for a $4.5 million Enterprise Incentive Fund, which Gov. Peter Shumlin can tap at his discretion with limited legislative oversight….
Perhaps when Governor Cuomo gets over his advanced state of shock, he can think about agreeing to some small concessions to keep a steady, reliable electricity supplier, with a steady, reliable payroll, operating in his state. He won't even have to figure out how to explain why he is sending almost $2 billion dollars of New York taxpayer money to Abu Dhabi. Because he won't be sending any money to Abu Dhabi!

By keeping Fitzpatrick operating, Cuomo will be taking care of his own people. I think that is what a governor is supposed to do. I urge him to do so.

8 comments:

Governor Cuomo should consider the environmental consequences of allowing yet another emissions free nuclear plant to close. Many US companies are putting an internal charge on CO2 varying from Microsoft's low of $6 per ton of carbon dioxide emitted to ExxonMobil's $80 per ton — up from $60 per ton last year. Once this plant closes it won't be quick or easy to start it back up in the event (likely sooner or later in the estimation of most observers) that some form of carbon tax is placed on fossil fuel plants. It should be possible to factor in the value of prevented emissions as a justifiable subsidy to keep Fitzpatrick operating. If $40 a ton of averted CO2 was calculated based on fleet average emissions of ~ 0.8 tons per Megawatt/hour, the value of Fitzpatrick's avoided emissions would be over $220 million based on annual 2013 plant output of 6,918 Gigawatt/hours.

Decisions involving energy production need to take careful account of the value of emission reductions. Paying now to keep this facility operating will pay climate dividends in the future and would be wise investment now in light of the importance of achieving meaningful reductions in CO2 emissions.

I think Cuomo has calculated, correctly, that there's more political downside for him in annoying the anti-nuclear "green" lobby than in taking the job losses involved at Fitzpatrick. All he's doing is spinning it to make the low-information voters think that a big out-of-state corporation is behaving badly.

If it makes it harder for a future governor to meet carbon dioxide reduction targets, well, that's not his problem.

Cuomo and Shumlin are cut from the same rancid political cloth. Its all a political calculation for them. Cuomo is following Shumlin's game plan. Demonize an out of state company, marginalize the local employees, and pander to the "progressive" anti-nuclear whackos that compose a substantial portion of their base support. There are more votes in pandering to the whackos than there are plant employees. So, from Cuomo's viewpoint, so what if hundreds of families are uprooted or destroyed, loss of income taxes, non-support of local volunteer agencies, maybe a suicide or two. He won't care about any of that when compared to the thousands of votes he'll get from the idiots.

What a helpful and thoughtful post! Would you be willing to do a quick guest-post for me on how much carbon is saved and what level of carbon tax would make (say) a two-cent incentive for Fitzpatrick a good bargain for the state's utilities? I said "two cents" because that is on the order of what wind turbines get in production tax credit, and WAY less than they get for RECs.

Email me at mjangwin at gmail if this interests you. No problem if it doesn't…

Anon and anonYes, you are right. My husband put the matter very succinctly: "Cuomo figures that nuclear people probably don't vote for him anyway, so why should he care about them?" The rule of law is supposed to prevent this sort of "tyranny of the majority." But sometimes it does not work all that well. I remind myself sometimes of one of my favorite books of essays, which had the true and intriguing title: "Two Cheers for Democracy." Two cheers because it is the best that humans have done. Not three cheers, because it is an intrinsically imperfect system.

Like the old saying goes, two wolves and a sheep voting on what's for dinner. The Founders knew that democracies invariably fail and so established a Republic rather than a Democracy. It especially fails when issues that should not be subject to plebiscite become so and the wrong "decisions" (votes) are made because of lack of information, or distorted information, or political pandering to special interest groups that have money, or votes, or both.

Nuclear power is the red-headed stepchild of Northeastern power generation. Like most such children, its unwanted status has less to do with its worth and more to do with the narrow, made-up minds of those in charge. Too bad its potential for good is being wasted while slower, duller entities are pushed to the fore.

What poster Guy Page says is true and it really chaps my a$$ that such is the world the dullards and idiots have made. The worst-performing, most unreliable, most costly (without subsidies) energy sources are given the most favorable treatment, while nuclear energy, which is, by almost every measure, superior to all the others, is being driven to an early grave by the same people who say they care the most about (take your pick): the environment, energy security, the poorest among us, et al. Its like if you ran a business and you rewarded the poorest-performing employee you had, while sacking the most productive.

Years ago, Dick Trudell made that same analogy, about baseball players. He described Vermont Yankee as batting over .800, while the rookies require state subsidies before they will even go to the locker room to suit up, etc.

At one point, you made reasonable comments. Now your comments are snarky notes about color schemes. It undoubtedly takes you more time to write these comments than the time it takes me to delete them. I don't quite get what you are trying to do, but unless you change the content of your comments, they will keep getting deleted.